Any move by the government to increase the present minimum GST slab will deal a death blow to micro, small and medium enterprises (MSMEs) which have been battling for survival in the post-Covid phase, said Madurai-based Agrofood Chamber of Commerce and Industry.
“It is heard that Union Finance Ministry is considering an increase in GST slab rates from 5, 12, 18 and 28 per cent to 8, 18 and 28 per cent. This has come as a rude shock to the trade and industry and MSMEs,” S Rethinavelu, President of Agrofood Chamber, said in a statement.
Encourage tax evasion
Most essential commodities are under 5 per cent rate and goods of day-to-day importance are under 12 per cent. The proposed increase in the tax rates would push up the prices of almost all commodities when India is already facing unprecedented inflation due to the Russia-Ukraine conflict. The increase in tax rates would only encourage tax evasion. Honest traders would find it very difficult to face unhealthy competition from tax evaders and they may be forced to close their establishments, he stated.
The accepted and proven concept of taxation is to fix the tax rates well within the percentage of margin, which would spur compliance, resulting in increased tax revenue to the exchequer. Further, under the prevailing continuous inflationary trend, the government can mop up more revenue even without increasing tax rates.
Request for simplification
GST Council may consider proposal to raise lowest slab to 8 per centCurrently, GST is a four-tier structure attracting a tax rate of 5, 12, 18 and 28 per cent.
The trade and industry is requesting the Union Finance Ministry to reduce GST rates to 5, 10 and 15, and also simplify the enforcement of GST which has been complicated by the issuance of hundreds of clarifications, circulars and amendments, making the otherwise progressive taxation system difficult for not only ordinary traders but for tax officials and consultants too.
“We, the trade and industry, pray that this news of increasing GST rates may remain a rumour and request the Union Finance Ministry to not kill the goose that lays the golden egg,” Rethinavelu said.